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Whistleblowers and investigations reveal how bosses and well-connected service providers allegedly conspired to loot from the national oil company.

Top managers at PetroSA ordered irregular payments of R200-million during a feeding frenzy at the national oil company that involved a well-connected lawyer and a fund manager, detailed evidence suggests.

They also appear to have risked another R800-million in potential liabilities, raising the total in questionable spending decisions to a ballpark R1-billion.

Allegations that some of the ­payments involved kickbacks remain unproven, but a former director has told the police he believes anti-corruption laws were broken, and ama­Bhungane has found evidence of a large, unexplained payout to an unidentified third party. Continue reading →

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FROM the giant floating platforms of the Gulf of Guinea to the new energy ports of East Africa, sub-Saharan Africa is about to be reshaped by a hydrocarbons revolution. The continent’s oil and gas outputs have steadily grown in recent years. Taken together, Nigeria, Angola and lesser producers already account for about 7% of world oil production. But the potential explosion of production in the deep waters of the Gulf of Guinea, East Africa’s emergence as a crude producer, the natural gas discoveries off the coast of Tanzania and Mozambique and the exploration that is under way even in formerly no-go areas such as Somalia, are changing the game.

Across the continent, this activity will dwarf investment opportunities in other industries or sectors for some time to come. Foreign direct investment in infrastructure – exploration and drilling equipment, pipelines, dredging and construction of deep-water ports, liquefied natural gas (LNG) plants and offshore floating platforms — could top $150bn over the next decade. Investment in LNG plants in Mozambique alone could be three or four times the country’s annual gross domestic product.

While new producers have drawn most of the attention, and the trend is towards diversification in the number of producing countries, existing players still lead. Nigeria could add up to 12 new offshore fields with at least 1-billion barrels each in reserves if it can get the long-delayed Petroleum Industries Bill into law and reach a deal with the majors on the fiscal terms for the deep offshore. Jockeying ahead of an Angolan sub-salt licensing round appears substantial.

Oil’s outsize contribution can be seen in trade figures with China. They are growing, but only if we take into account that two-thirds of China’s imports from Africa are crude oil, chiefly from Angola and Sudan, and that if China stopped buying African oil, the trade figures would be very deflated.

The importance of oil and gas to Africa increases with the decline of minerals such as iron ore and copper, which once were economic mainstays. Gains from new technologies have also contributed significantly to Africa’s coming hydrocarbons boom. Angola’s sub-salt drilling successes — which have opened up substantial new acreage — followed technological breakthroughs in the Tupi deposits in Brazil that almost doubled that country’s offshore reserves. Gabon also has considerable sub-salt potential, which could reverse its declining outputs.

The African oil and gas boom comes when energy markets are shifting dramatically, making for a more dynamic investment climate. The revolution in shale gas, due to horizontal drilling and hydraulic fracturing, or ‘fracking’, has converted the US from an importer to a potential exporter of natural gas. This is transforming the natural gas market globally and will ensure that the discoveries off the coast of Mozambique and Tanzania will mostly find their way to East Asia, where demand has surged.

At the same time, US demand for African oil is waning. US purchases of African crude fell by 27% in 2011, with further cuts last year. Imports from Nigeria were worst affected, with North Dakota’s shale oil displacing Nigeria’s similarly light, sweet crude from the Gulf Coast refineries.

This contradicts overhyped views that the US and China are in a geopolitical scramble for Africa’s resources. If China displaces the US as a consumer of African oil, it will be as a result of market forces, not because of an ideological great game.

China’s three state-owned oil companies, all active in Africa, generally operate according to the same rules as everybody else. CNPC, CNOOC and Sinopec’s engagement is often structured through sharing risk and teaming up with western companies. In East Africa, for instance, CNOOC partners with Ireland’s Tullow Oil and France’s Total.

African oil and gas exploration and production, once dominated by the supermajors, is now opening up to new players and investors. The discoveries of the natural gas reserves offshore East Africa and new oil finds in Ghana, Uganda, Sierra Leone and northern Kenya have been made by mid-level independents such as Anadarko, Tullow Oil, Cobalt International and Ophir Energy.

The majors do maintain the technological edge in deep water, where most development potential lies. Ghana experienced this first hand when, after it blocked Exxon’s attempt to buy into its Jubilee field in 2009, the field suffered design failures and production stoppages under Tullow Oil, which was rolling out its first deep-water production. The explosion and spill at BP’s Deepwater Horizon rig, which devastated the US’s gulf coast, is an object lesson in the dangers of outsourcing deep water to smaller operators.

All of this constitutes a diplomatic, environmental, governance and — ultimately — democratic challenge for Africa’s political leadership. The diplomatic challenge arises from potential disputes over hydrocarbon rights across poorly demarcated maritime boundaries. If it is managed well, these disputes could offer an opportunity for creative ways of working together through, for instance, joint development zones. A proposed pipeline in East Africa could link Southern Sudan, Uganda and northern Kenya to Mombasa or the new port of Lamu, an exercise in co-operation that will bind East Africa closer together.

The biggest challenge of the coming boom will be to ensure that benefits reach ordinary Africans. This is dependent to some extent on how assertive political leaders are in setting the terms, running the auctions and negotiating supply and production sharing contracts with the oil companies. Laws containing fiscal terms are being reworked, most notably in the long-running debate around Nigeria’s Petroleum Industries Bill. Loopholes that allow for tax avoidance through transfer pricing and nonpayment of capital gains are also under attack in some places.

Though outcomes are uneven, several countries have mounted ambitious drives to boost local content. Indigenous players are transforming Nigeria’s business environment, both as operators of oil blocks and as emerging oil services contractors.

As the number of oil-producing states grows, governments and operators will need to do more to protect oil wealth from plunder. Though oil-based corruption is far from vanquished, the international terrain is more difficult. The days when autocrats such as Omar Bongo and Sani Abacha could park hundreds of millions of plundered dollars in Swiss bank accounts have passed. The banks have tightened up, as have the antibribery sanctions on foreign multinationals such as the US’s Foreign Corrupt Practices Act (FCPA) and the UK’s Bribery Act.

Five of the 10 highest FCPA settlements to date — totalling fines of more than $1.58bn — have been imposed on companies paying bribes to win or retain business in the African oil and gas sector.

African leaders have committed themselves, with varying degrees of seriousness, to anti-corruption initiatives such as the Extractive Industries Transparency Initiative.

Ultimately, the most important constituency for good governance and transparency measures is ordinary Africans themselves. There are few things that would test Africa’s new democracies more, and render them more meaningful, than holding leaders accountable for what they do with Africa’s new oil wealth.

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TEXAS-based Fluor Corporation has been awarded a front-end engineering and design contract by South African Petroleum Refineries (Sapref) for its clean fuels project in Durban.

New York-listed Fluor said on Tuesday the undisclosed contract value was booked in the first quarter of this year.

“This award builds on our significant clean fuels expertise as well as Fluor’s ongoing site support work with Sapref in South Africa for nearly 20 years,” Peter Oosterveer, president of Fluor’s energy and chemicals group, said.

Sapref is a joint venture between Shell SA Refining and BP Southern Africa. It is the largest crude oil refinery in southern Africa, providing 35% of South Africa’s refining capacity.

The contract would be the first to be carried out in Africa under Shell’s enterprise framework agreement with Fluor. This encompasses engineering and project-management services throughout Europe, Africa and the Middle East.

The project would allow for a substantial upgrade of the Sapref refinery, which would improve the quality of transport fuels by reducing levels of sulphur, benzene and aromatics. This would meet enhanced legislative requirements.

The agreement allowed for a potential engineering, procurement and construction management contract to be signed at a later date.

Fluor provides global expertise in energy, chemicals, infrastructure, operations and maintenance, as well as manufacturing, life sciences, mining, power and transport.

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State-owned oil and gas company PetroSA, which reported a R1.4 billion profit for the 2012 financial year to MPs yesterday, sent signals that a multibillion-rand crude oil refinery in the Eastern Cape – likely to source Venezuelan supplies – was on track.

Nokwe-Macamo, replying to questions about the crude oil refinery dubbed Project Mthombo, said feasibility studies would be completed in December. She did not believe the project would be moved from its envisaged site at Coega outside Port Elizabeth, even though there was no pipeline running from the area.

“There is a pipeline in Durban,” she said, urging journalists not to dwell on the issues of how the refined products would be transported…

(Editor’s note: We DESPERATELY need the Integrated Energy Plan. It is ridiculous to build a crude oil refinery in a place where there is no pipeline to transport the refined products in land and when we are approaching the end of cheap crude oil and the start of cheap gas. So, if fracking goes ahead we will be exporting gas and importing crude oil. Why not rather exploit Mossgas and import gas and turn it into liquid fuels? All we need are LNG import facilities. Something doesn’t sound right!)

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We were wrong about peak oil: there’s enough in the ground to deep-fry the planet.

The facts have changed, now we must change too. For the past ten years an unlikely coalition of geologists, oil drillers, bankers, military strategists and environmentalists has been warning that peak oil – the decline of global supplies – is just around the corner. We had some strong reasons for doing so: production had slowed, the price had risen sharply, depletion was widespread and appeared to be escalating. The first of the great resource crunches seemed about to strike…